In an unpredictable trading week, investors displayed an emotional roller-coaster. They oscillated between fears of dwindling demand due to the escalating Israel-Hamas conflict and subsequent dismissal of the impact. However, Friday marked a significant turnaround, with oil prices skyrocketing by 6 percent as stakeholders interpreted the war might indeed widen its scope.
West Texas Intermediate concluded the market session with an impressive surge of $4.78, which is a 5.8 percent increase, settling at $87.69 per barrel. In concurrence, Brent also ascended with an increase of $4.89 – a 5.7 percent rise – standing at $90.89 per barrel. WTI logged a week-on-week gain crossing 4 percent. This improves its stance as the highest weekly surge since September 1.
The Escalating Middle East Tensions and the Impact on Oil Prices
Lukman Otunuga, a leading figure in market analysis at FXTM, offered valuable insight into the factors driving the trading trajectory. He attributed the buoyant prices to the intensifying Middle East tension. This region represents approximately a third of the world’s total oil supply. Actions by the US to tighten sanctions against Russia’s crude exports further supported this upward trend.
These conditions emerged from measures instituted by the US on Thursday, complicating Russia’s attempts to evade the price cap on its oil.
The Oil Market Responsiveness to the Israel-Hamas War
As for the sudden shift of perception regarding the Israel-Hamas war, it was reportedly influenced by a warning from Iran’s foreign minister. He cautioned that the Tehran-supported militants might launch a new battlefront if Gaza’s blockade persisted. Also, Friday’s robust rally signals that investors are eliminating bearish wagers before the weekend, according to traders.
Edward Moya, a seasoned market analyst at Oanda, shared his viewpoint on the sensitive situation. He stated, “The oil market is very receptive to developments involving the Israel-Hamas war. Regardless of US production reaching record highs, we could experience a significant supply shock shortly.”
The International Energy Agency’s Pledge to Stabilize the Market
The International Energy Agency, observing the Israel-Hamas conflict’s impact, acknowledged the market tremors. However, they claimed that the war had not yet influenced the supply. To ease concerns, they asserted their readiness to ensure a constant market supply in case of a sudden supply crisis. This intervention could involve member nations releasing emergency stocks, or introducing measures to control demand. This indicates a serious commitment to uphold market stability amid the ongoing conflict.
